Like Kind Exchange?

[mwarney]

We can't have a year go by without a Like-Kind-Exchange question...

I’ve always struggled with these rules and trade-in scenarios for a business auto. I would appreciate any advice on how to handle a “negative equity” trade-in situation.

Facts:
-OLD vehicle was used MORE than 50% for business.
-OLD vehicle cost, minus std mileage allowable (at 100% bus use) is $18,000 (basis).
-NEW Vehicle Cost is $33,000 (a “heavy” SUV).
-OLD vehicle trade allowance is -$4,000 (Amt owed 16k less trade allowance of 12K).
-TP makes new loan and pays a total of $37,000 (33k plus negative trade allowance).
-TP wants to take the maximum Sec 179 for a heavy SUV.

On the one hand, as a single transaction, she paid cash of $37K to purchase the new vehicle. But on the other hand, if you take these as independent transactions, she took out a new loan which was then used to pay off her old vehicle, then subsequently traded that vehicle toward the new one. In the first scenario, she can max out her Sec 179 to $25K since she paid $37k. But in the second scenario, she would only have paid $21K in cash and would therefore be limited to that amount for a sec 179.
The dealer itemized: a)Trade allowance minus b)Amt owed to a summary line item c)called “net trade in” of $-4,000.

Any thoughts or suggestions would be greatly appreciated.

[dyne]

Have them use the standard mileage rate deduction in the future. It is much easier and
almost always give a greater deduction and it eliminates your problem.

[mwarney]

Have them use the standard mileage rate deduction in the future. It is much easier and
almost always give a greater deduction and it eliminates your problem.

You can't get a section 179 with the standard milage rate.

[S T]

LKE - Negative

See this prior post - you will have to overlook some of it as both Bees and I were transposing numbers or posting incorrect numbers, however, in the end we arrived at what to report

http://www.thetaxbook.com/forums/showthread.php?p=13294&page=2&highlight=auto

[mwarney]

See this prior post - you will have to overlook some of it as both Bees and I were transposing numbers or posting incorrect numbers, however, in the end we arrived at what to report

http://www.thetaxbook.com/forums/sho...highlight=auto

Thanks... I will check it out in the morning!

[mwarney]

See this prior post - you will have to overlook some of it as both Bees and I were transposing numbers or posting incorrect numbers, however, in the end we arrived at what to report

http://www.thetaxbook.com/forums/sho...highlight=auto

Thanks ST... That is an excellent discussion and explanation of how to calculate and report the basis on a trade-in. The only thing left to figure out is how we should report this transaction to maximize the current year section 179 expense deduction. After reading this thread, it sounds to me like there is no choice in the matter. Is the 179 limited to Cash price less trade-in? In this case that would equal 33,000 - 12,000 = 21,000. Am I correct?

I guess what I am struggling with here is that CY Sec 179 expense is limited to cash paid. But the "cash paid" amount can be different depending on how one interprets the details of the transaction.